taxes on insurance settlement

If I receive a settlement from a pharmaceutical company for the death of my mother, is the settlement taxable by the IRS? I am not the executor of her estate, but am one of six heirs in this settlement. Tax attorneys have said the proceeds are not taxable in the state of Alabama, however my father's accountant says that any amount over $10,000 will be taxed. Thanks for any help given.

I am a tax accountant at a firm in MD. I went and did alittle research on your question for the State of AL and I found that in the 2000AL Form 40 Booklet it states that "insurance damages for injury or sickness" are exempt from calculating your income. If the settlement funds were written to the estate and disbursements are going to be made to the heirs from the estate that would be a different situation. If that is the case than I would have to look up gift & estate law in AL. But if the settlement disbursement was made to you, you do not have to pay income tax. I hope this was some help. If you want me to use my resources to look up the gift & estate issue just email me back and I will do so.

Cathie